Working Papers

The "Masters Hypothesis" is the claim that unprecedented buying pressure from new financial index investors created a massive bubble in agricultural futures prices at various times in recent years. This paper analyzes the market impact of financial index investment in agricultural futures markets using non-public data from the Large Trader Reporting System (LTRS) maintained by the U.S. Commodity Futures Trading Commission (CFTC). The LTRS data are superior to publicly-available data because commodity index trader (CIT) positions are available on a daily basis, positions are disaggregated by contract maturity, and positions before 2006 can be reliably estimated. Bivariate Granger causality tests use CIT positions in terms of both the change in aggregate new net flows into index investmen...